You cannot complain to the Income Tax Department every time if you have not received interest on refund. There are certain facts and circumstances wherein you cannot claim interest on a refund of Income Tax. Meanwhile, it is important to start from scratch and understand the entire mechanism.
Whenever liability of tax of an assessee in a particular financial year is lesser than the real/actual tax paid by way of:
- The tax collected at source (TCS),
- Tax deducted at source (TDS),
- Advance tax or self-assessment tax,
Then the assessee is eligible for tax refunds. And thereafter this refund is claimed by filing an income tax return before the due date. And Lastly, The tax department thereafter issues refunds after processing the ITR.
However, in specific cases, Along with the refund, I-T Department further gives interest to eligible taxpayers. The terms and conditions of payment of interest is as follows:
“The interest will be calculated at the rate of 0.5% for every month or part of the month starting from the first month (April) of the assessment year, said CA Mansi Gupta.”
As already said, this refund is only paid if 2 necessary conditions are fulfilled:
- 1-Necessary Condition: The ITR should be submitted by the assessee/taxpayer on or before the due date.
- 2-Necessary Condition: The amount of refund should be more than 10% of the actual tax liability that is calculated in the regular assessment or summary assessment.
The aforesaid eligibility conditions for getting interest on refund can be understood with an example:
For Instance, a taxpayer has already paid an income tax of Rs 6.40 lakh as a Tax Deducted at Source (TDS). However, in the summary assessment consequent to filing ITR, the true/actual tax liability of the taxpayer comes at Rs 5.96 lakh then the taxpayer shall receive a refund of Rs 44000; however, without any interest. The reason being the due refund amount is less than 10% of the liable tax of Rs 5.96 lakh.
However, if the refund amount is greater than 10% of the actual/true tax for which assessee is liable then interest @0.5% for each month that shall be starting from April 1 of the assessment year to the date on which the refund is permitted is paid given the condition that ITR is filed within the due date. “If the refund is not furnished by the due date, then interest shall be calculated from the date of furnishing ITR to the date on which the refund is granted, said Ms. Gupta.”
